Web

Amazon’s income falls dramatically in last quarter

amazon results fall dramatically in last quarterDespite matching Wall Street predictions, Amazon’s earnings report for the second quarter of 2012 show an amazing drop in income for the online shopping giant when compared with the same time period just a year before.

According to Reuters, Amazon is reporting Q2 sales of $12.8 billion, up 29 percent from 2011, and net income of $7 million, or a penny a share. That figure is a staggering 96 percent down on the second quarter results of 2011, with the company saying that profits had been hit by the $65m loss related to its acquisition of Kiva Systems in March (Revenue was also apparently affected negatively by currency movements, according to Amazon, to the somewhere in the region of $272m. That exchange rate thing always kills me, too).

Product revenue for the company – Essentially, its well-known online retail services – grew 25 percent compared with the same period last year to $10.79 billion, with its services revenue, including Amazon Web Services, online marketplace software and its pay-as-you-go cloud service, increased an impressive 57 percent from 2011 numbers to reach $2.04 billion. Overall, the company’s gross profit margin was 26.1 percent in the second quarter, up from 2011’s 24.1 percent. As Scott Tilghman, an analyst at Caris & Co., points out, those are good numbers to have. “There was tremendous growth in Amazon’s higher-margin services,” he said. “I can’t find a quarter in the past nine years when Amazon’s gross margin was over 26 percent.”

The company also forecast third quarter revenue of $12.9 billion to $14.3 billion, which fits external analysts’ revenue forecast of $14.1 billion, as well as a third quarter operating loss of $50 million to $350 million (Excluding stock-based compensation and other items, the forecast was between a loss of $75 million and a profit of $225 million), due in part to the increased spending the company is planning. “We’re investing a lot because of the opportunities we see,” Amazon’s Chief Financial Officer Tom Szkutak explained, pointing to the company’s planned 18 new warehouses as an example of the investments the company is planning as it heads into the holiday season. Also on the shopping list, according to Szkutak: more investment in video and cloud infrastructure and technology.

Trading following the reporting was cautiously optimistic, 1.6 percent to $223.59 in after-hours trading. “The real story here is around guidance,” explained analyst Kerry Rice, from Needham & Co., “It was a little bit light from what people were expecting, and the bottom line much lower than what people would have expected. A common theme for Amazon is they’re going to spend to build the infrastructure and capacity to deliver the products and services to the consumer that they feel the consumer wants,. As long as they grow in the high 20s to 30-percent range year over year, they will continue to spend like that.”

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